Defensive Public Bank stocks bumped up to ‘Buy’ in face of geopolitical volatility

The shares of Public Bank Bhd has been upgraded to ‘Buy’ from ‘Hold’ at RHB Investment Bank Bhd with a slightly higher 52-week target price of RM4.80.

In a note released today, RHB said it believed recent events such as the escalation of tensions in the Middle East and shift in US Federal Funds (FFR) rate expectations, coupled with the upcoming US presidential election, would likely lead to increased market volatility.

“Amid such a scenario, we are tactically upgrading our call for Public Bank as we see room for a big-cap, defensive, quality name in investors’ portfolios to tide through the volatility. Fundamentally, the group’s growth prospects have not changed, in our view,” it said.

The counter closed at RM4.14 yesterday (April 18). Its 52-week high/low was RM4.52/RM3.78.

The research note provided five reasons for the upgrade, including earnings safety as it deemed Public Bank promises domestic-driven earnings with stable drivers offer investors good earnings predictability.

It noted the stock’s underperformance when compared to the FBM KLCI by 9% YTD, noting that focus could turn to laggards as volatility rises.

Its low foreign shareholding –now at 25.4% vs the recent multi-year low of 25.1% at end-October 2023, was another reason given to look at the stock.

It said Public Bank’s current foreign shareholding level was depressed, but appeared to be stabilizing, adding that it could help cushion it against further selling pressure from foreign institutional investors. – TMR